alt Hacker NewsSee also:
> The Grossman-Stiglitz Paradox is a paradox introduced by Sanford J. Grossman and Joseph Stiglitz in a joint publication in American Economic Review in 1980[1] that argues perfectly informationally efficient markets are an impossibility since, if prices perfectly reflected available information, there is no profit to gathering information, in which case there would be little reason to trade and markets would eventually collapse.[2]
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_paradox
So the more efficient markets are, the hard it will be to find "alpha" (returns), and so more people will stop trying. But as more people stop trying, markets will become more inefficient, in which case people can find alpha again, which encourages more participants.
Replies
This plays directly into fisher Black's "Noise" http://www.e-m-h.org/Blac86.pdf
Turnips and Carrots could be priced equally per tonne, and still be worth trading because although you might think all root vegetables are substitutable, it turns out you can't make carrot soup with Turnips.
It's always worth remembering trade involves use values as well. We don't only trade for asymmetric profit, and there are things like hedging which include a yield where both can acknowledge future risk, and price accordingly.
I'm probably ignorant of some magic economist reason why the words are fluid and don't mean what I think they mean: this always seems to be the case talking economics from the stuffed armchair.
Another take on this is that we can agree to facts and disagree to consequences. Same information, different conclusions.